Amidst a string of IPOs making solid debuts at the bourses, Fedbank Financial Services had a tepid listing with a 1% discount to its IPO price.The lackluster listing was in line with pre-listing expectations, which were dampened by a weak grey market premium and a relatively tepid investor response. The IPO was the least subscribed among all the issues last week.
The NBFC has marked a steady growth in its top and bottom lines over the last three years and has an edge over its peers by having access to capital from its promoter, Federal Bank.
However, analysts believe that most of the positive factors of the lender have already been priced at a P/BV of 3.3x based on FY23 book value.
“We advise investors who have received allotment to sell shares on the opening day and wait for future quarterly results and management guidance to re-enter at lower valuations,” said Shreyansh Shah, Research Analyst, StoxBox.
Fedbank Financial is one among five private bank-promoted NBFCs in India, focusing on catering to the MSMEs and the emerging self-employed individuals sector.
It is the fastest-growing gold loan NBFC in India among its peers and has the second lowest cost of borrowing among the MSMEs, the gold loan peer set in India in FY23.
As of March 2023, the company boasts of the third fastest AUM growth among NBFCs in India with a three-year CAGR of 33% between FY20-23. Nearly 86% of the total loan assets are secured against tangible assets, namely gold or a customer’s property.
Its revenue from operations rose 46% year-on-year (YoY) to Rs 361 crore in the three months ended June period, while profit jumped 23% YoY to Rs 53.8 crore.
Net proceeds from the fresh issue will be utilised towards augmenting the Tier–I capital base to meet its future capital requirements, arising out of the growth of business and assets. A part of the proceeds will also be used for meeting offer expenses.
“Given the subdued listing we recommend a neutral stance on Fedbank Financial Services,” said Shivani Nyati, Head of Wealth at Swastika Investmart.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
